Purchase plus improvement programs can be far more beneficial than your average loan. If you have never done any research into how you can take advantage of a purchase plus improvement loan, you could be missing out on your dream home. If you’re a first time buyer, you may be able to take advantage of said benefits so that you can have more options available to you when you’re searching for your home.
The Improvement of Your Home
The main purpose of a first time buyer getting a purchase plus improvements loan is to do any renovations to their house by being able to borrow against the “improved value” of the property. This means that if you buy a $400,000 home and intend on putting $50,000 worth of renovations in it, the improved value would be $450,000. Generally your mortgage lender will have a cap on the amount of money that you can use for the improvements, such as 10% of the improved value of your home.
Consolidating Renovation Debt
If you’ve ever had the opportunity to go through the renovations process, you are undoubtedly aware of how expensive and time consuming it can be. Even professionals encounter unexpected costs that they have to pay for in order for the home to be perfect. When you choose a purchase plus improvements program, you will be able to consolidate your debt from renovations directly into your mortgage. This gets rid of the need for any other credit cards or loans with horrible interest rates. Instead, you will just be able to pay off of your mortgage (with the added renovations value) at one time.
Paying for the Renovations
This aspect of a purchase plus improvements program depends on the type of lender that you will be working with. In most cases, home owners will be responsible for putting up the money for the renovations instead of being able to have a loan readily accessible for them to use. In other cases, you may be able to get the cash value of your renovations and put it towards your house improvements. It is important that you confirm with your bank so that you can be financially prepared to put forth the money until the project completion date. Generally banks may need to see that the work has actually been done on your home and that its appraised value is accurate before “paying you back” for your renovation costs.